Transit union leaders, facing mounting fines, possible jail time and the wrath of millions of commuters, agreed Thursday to "take steps" to end a crippling strike even before a final contract was reached.

The deal with the Transit Workers Union could pave the way for a resumption in subway and bus service by Friday, if the union's executive board gives the final OK.

"Both parties have a genuine desire to resolve their differences," said Richard Curreri, head of a three-member state mediation panel. "They have agreed to resume negotiations while the TWU takes steps toward returning its membership to work."

Gov. George Pataki, a strident critic of the union, said the announcement was "very positive for all New Yorkers."

The announcement was in contrast to the harsh rhetoric of the last two days, during which a judge had said he would consider ordering jail time for union officials who called the illegal strike.

The deal was approved by union leaders who met with the mediator but still needed final approval from the executive board of Transport Workers Union Local 100. The Metropolitan Transportation Authority has said it would take at least 12 hours to restore service once the board votes, expected sometime Thursday afternoon.

Word of a possible deal spread though the rank and file.

"From what I've been hearing, we're getting close," Ralph Torres, a striking bus driver, said from a midtown picket line. "I'm ready to work the rush hour this afternoon if they let me."

The two sides had returned to a Manhattan hotel around 1 a.m., the first time both sides were in the building since the strike began. On Wednesday, union president Roger Toussaint raised the possibility of an agreement to halt the walkout when he said negotiations could resume if the MTA took its current pension proposal off the table.

A chief sticking point has been the pension proposal to raise contributions to the pension plan for new workers from 2 percent to 6 percent. The union contends it is woefully inadequate and would be impossible to accept.

Curreri said the tentative deal came without the MTA pulling its pension proposal but said the agency would consider making changes to its health care proposal. The MTA had proposed that new employees pay one percent of their salary for health care. Under the old contract, health insurance was free.

The announcement came 56 hours after workers walked out at 3 a.m. Tuesday, the city's first transit strike in 25 years. Curreri said there would be a news blackout during further negotiations, as agreed to by both sides. Citing that blackout, union spokesman Jesse Derris said in a recorded message that he would not comment.

Curreri spoke at the same time lawyers from the city and state were due in a Brooklyn courtroom in an effort to get union workers back on the job. That session was postponed until 4 p.m.

The contract covering 33,000 transit workers expired last week, and the union called the strike despite a state law banning public employee strikes.

The pact was announced after a day of sometimes bitter comments. At a news conference Wednesday, Toussaint angrily replied to Mayor Michael Bloomberg, who had said the union "thuggishly" turned its back on New York.

"We wake up at 3 and 4 in the morning to move the trains in this town," Toussaint said. "That's not the behavior of thugs and selfish people."

The bitterness was captured in tabloid headlines. The Daily News declared a "War of the Words," and the New York Post screamed: "Jail 'em!" in front of a composite image of Toussaint behind bars.

Millions of New Yorkers again braved another frigid commute Thursday morning, streaming into commuter rail hubs, hiking over bridges and pouring into cars and cabs. Some tried to hitch a ride.

In the first serious injury since the strike began, an off-duty firefighter was critically injured Thursday when he was struck by a private bus while riding his bike to work.

Groups of commuters huddled at designated areas to be picked up by company vans or buses or prearranged car pools. The scarves, hats and warm coats were back paired with running shoes or hiking boots.

On Manhattan's East Side, traffic moved smoothly during the early part of the morning rush. But the story was different the night before, said Yves Desrmeaux, 47, a Manhattan parking lot attendant who lives in Brooklyn.

"Traffic was dense coming over the Manhattan Bridge," he said. "It (the strike) has really made a significant difference. But the transit workers work hard. I hope the MTA gives them something to make them happy this Christmas."

Others were not daunted by the strike.

"Rain, sleet, snow or strike, we'll get to work," vowed Paul Jensen, the office manager at the Weber Shandwick public relations firm in midtown.

A judge had imposed a $1 million-per-day fine on the union for defying an order barring the strike — a punishment that would not take effect until appeals are complete.

But in an effort to put more pressure on the union, city lawyers Wednesday had asked the judge to issue another order directing union members to return to work under the threat of further fines. The judge suggested that union leaders could be jailed.